Oklahoma’s $8.3 billion budget for next fiscal year includes $164 million for Medicaid expansion, opposed by Republican leaders but approved on a ballot measure last year.
More than 1 million people or 25% of Oklahoma’s population were receiving Medicaid coverage last year, according to the Oklahoma Health Care Authority.
On June 30, 2020, voters narrowly approved Question 802 to expand Medicaid coverage to the working poor not covered by health insurance. The expansion will go into effect with the new fiscal year July 1.
The expansion of Medicaid will be funded permanently through a mix of federal funds and a phased increase in hospital fees.
The budget, passed in the Senate Friday, awaits Gov. Kevin Stitt’s signature. The Republican governor, who participated in negotiations over the budget deal, is expected to sign the agreement.
On Friday, Stitt signed companion bills, including House Bill 2962 that lowers income taxes on individuals and businesses while increasing investment in education.
House Bill 2962 cuts individual income tax rates by 0.25%, lowering the top rate from 5% to 4.75%. House Bills 2960 and 2963 reduce the corporate income tax from 6% to 4%.
Both tax changes are effective Jan. 1, 2022.
“I’ve pledged to make Oklahoma a Top 10 state for business and making our business taxes among the lowest in the nation is another tool that will help us continue to recruit and retain companies,” Stitt said.
Stitt also signed Senate Bill 1080, which makes improvements to the Equal Opportunity Scholarship Act that provides tax credits to donors who voluntarily contribute funds to support education, including public school foundations.
SB 1080 raises the amount of tax credits available for the program to $50 million from $5 million, with $25 million earmarked for public schools and $25 million for private schools.
“Parents and students across Oklahoma want more options, and this program helps create more opportunities for kids to attend the school that best fits their needs,” he said.
Senate President Pro Tempore Greg Treat, R-Oklahoma City, called the 2022 spending plan “a tremendous budget for the state of Oklahoma that prioritizes and makes increased investments in education, provides tax relief for families and small businesses, and yet still maintains to keep more than $800 million in savings.”
“A year ago, the state faced a $1.3 billion shortfall and there was great economic uncertainty due to the coronavirus pandemic,” Treat pointed out in a statement on passage of the budget. “Now, this budget will help ensure the state can advance and thrive as we continue to emerge from the pandemic.”
Public schools will receive $3.16 billion, a $210 million increase over the current fiscal year ending June 30.
The budget restores the Earned Income Tax Credit refund for low- and moderate-income working families.
In keeping with President Biden's push for better Internet connections, the budget provides a $42 million tax incentive for broadband expansion in underserved areas.
Lawmakers also provided more money for the Attorney General’s Office to settle disputes with the federal government and represent the state in legal challenges associated with the McGirt case. The U.S. Supreme Court’s McGirt ruling in 2020 declared the laws making nearly half the state an Indian reservation were still in force, which led to negotiations over how laws could be enforced where the tribes had jurisdiction.
Rural infrastructure projects get $15.4 million under the spending plan.
Funding to various state pension funds used last year to mitigate the impact of pandemic-related budget reductions were restored.
“Getting tax relief, historic education investments, major economic development and infrastructure efforts, robust savings and more all into one budget is an unprecedented, tremendous step forward for Oklahoma,” said House Speaker Charles McCall, R-Atoka.
The budget represents a 7% increase from last year’s pandemic-related plan for the current budget year and a 2% increase when compared to FY 2020, according to the Oklahoma Policy Institute.
“At first glance, it appears that Oklahoma has modestly increased appropriated dollars in recent years,” according to an analysis of the budget by Emma Morris, an analyst for OPI. “However, in reality, appropriations have decreased by 28% over the last two decades when accounting for inflation and population growth,” she added. “The state has cut spending during each recession and then increased spending during subsequent recoveries, but never to the same level as before.”
Oklahoma receives nearly $1.9 billion in federal funding as part of the American Rescue Plan passed by Congress earlier this year.
The funding, according to the U.S. Department of Treasury, can be used for a variety of pandemic-related reasons, including to support COVID-19 response efforts; replace tax revenue lost because of government-mandated restrictions put in place to slow the spread of the respiratory disease; support state and local economies including businesses; and other related purposes.
Oklahoma's funding is part of $350 billion being released to state and local governments as part of the rescue plan.
With the federal relief and a rebounding economy, S&P Global Ratings removed its negative outlook on Oklahoma’s AA rating on April 13.
"The revision to stable reflects our view of Oklahoma's responsive budget management and the presence of constitutional and statutory procedures embedded within its government framework that support the state's capacity to effectively respond to unprecedented economic and financial pressures stemming from the public health and safety risks of the COVID-19 pandemic and the supply and demand imbalance in global energy markets in 2020 and 2021," said S&P credit analyst Thomas Zemetis. "These factors, in conjunction with the states comparatively low debt burden and steady funding of long-term post-employment liabilities over the past decade, support out view of credit stability.”
Moody’s Investors Service shifted its positive outlook on Oklahoma’s Aa2 issuer credit rating to stable with the onset of the pandemic in 2020.
“The state's Aa2 issuer rating reflects a moderately strong economy that remains exposed to the volatile oil-sector, very low state debt and low pension liabilities, and moderately strong governance that is hampered by constitutional limits on raising new revenues,” Moody’s lead analyst Joshua Grundleger wrote in the March 31, 2020, report.
A year later, Moody’s announced a review that left the rating unchanged.
Fitch Ratings has a stable outlook on Oklahoma’s AA issuer default rating.
“On a combined basis, the state's debt and net pension liability are well below the median for U.S. states as a percentage of personal income and a low burden on resources,” Fitch said in an April ratings report. “Other post-employment benefit obligations are small.”
